Battle for Broadcast TV Supremacy In Hands Of On-Demand Viewers

Last year was just the preview. Video-on-demand (VOD) and digital video recorders (DVRs) will be the kingmakers of television this fall season. The winners and loser of the broadcast TV season
premieres will be determined not by who gets the biggest live audiences the night shows air, but by who get the biggest delayed audience -- and, specifically, by who does the best job capturing
the fast-growing and increasingly valuable pool of VOD viewers.

For decades, broadcast TV networks have used the fall season to march out their new prime-time shows, typically to massively
receptive audiences eager to pick their go-to shows for the semester. Last year, as many of you remember, it didn’t turn out so well for broadcasters. Audience fragmentation, driven by
increasing competition from dozens of cable networks now armed with their own original programming, depleted a significant amount of prime-time viewers. To add insult to injury, many of
broadcasters’ most loyal viewers waited longer than usual to pick their shows, opting to wait to “binge view” multiple episodes at once, weeks and weeks after the premieres.

While the unique power and position of broadcast television gives it preeminent rate-card position throughout these challenges, the growth in delayed viewing was harmful. It was harder and took
longer for the networks to determine which shows would be hits. They didn’t get credit with their advertisers for significant portions of the ultimate viewing (50+% in some cases) because so
much of it occurred after the three-day Nielsen C3 rating window had expired. Finally, among the DVR viewing that did occur within the C3 window, many of those viewers skipped the ads, thus negating
their value and credit with advertisers.

This coming fall season will almost certainly be worse than last year. Competition from cable programmers is only growing, and many expect that delayed
viewing could represent 70% or more of some broadcast shows’ total audience. How networks handle these issues, particularly the challenge from delayed viewing, will have a big impact on their
future survival.

I believe that this is the year for broadcasters to fight to own the VOD viewer, fighting with the same vigor they used to own viewers in particular dayparts or timeslots.
Here’s why I believe it (I’ve included results of analysis my company has done on VOD viewing,):

On-demand and delayed viewers are television’s swing voters, particularly
in prime time on broadcast networks. Not only do DVR and VOD viewers watch more television than most viewers on average, but prime-time programs are what they time-shift most (more than 12% of the
prime-time show viewership in the second half of last year, 2.5X more than any other daypart) and broadcast programs are time-shifted more than cable shows (14% for all broadcast prime time versus 11%
for all prime-time cable). Given the low ratings that even the top shows get today, and that these numbers include many live event shows, which keep the overall averages low, this much
time-shifted (or on-demand) viewing can make the difference between the #1 and #2 shows or #2 and #3 in most timeslots this fall.

On-demand viewer are especially valuable. Not only do
they have higher incomes and are generally more demographically attractive to advertisers than the average TV viewer, but they actually watch the ads. Yes, unlike DVR viewers, where many can (and do)
skip the ads when they watch it on playback, most video-on-demand systems at most cable, satellite and cable operators stream the program and ads and don’t permit ad skipping.

VOD
viewing growing. The number of VOD viewers and their time spent viewing are growing, as more TV distributors and networks beef up their free offerings of just-run television programming, which
creates a virtuous circle for programmers and operators, as more choices mean more viewers and more viewers and more usage, which means more incentives to load in more programming. Plus, many
operators have upgraded their VOD interfaces over the past year, ameliorating a long-standing bottleneck for many viewers. This is probably why binge viewing after the C3 window represented a full
percentage point of all program viewership in the second half of last year.

VOD viewers are also DVR users, but are persuadable. While only 15% of DVR users also use VOD, 75% of VOD
viewers use their DVR regularly. This is a big opportunity for networks, since they are also quite persuadable as to which technology they will use. The majority of those viewers have shown a
propensity to view programs on-demand -- rather than through their DVR -- when presented with relevant and timely on-air promotions informing them of the shows’ availability on-demand.

The time to act is now. This is the year for broadcasters to win the on-demand viewer. First, they need to make sure that their shows are available on all the VOD systems, with full ad
loads. Second, they need to proactively promote on-demand viewing of their shows, doing promos across TV “after” their shows have aired live, as well as on VOD “barker
channels.” Third, they need to analyze and measure those audiences, as well as the effectiveness of their promotional campaigns. In today’s world of set-top-box measurement, there is no
reason to leave any of this to conjecture or guesswork. Finally, and most importantly, broadcast networks have to decide that they are going to make a strategic commitment to market to (and own)
on-demand viewers. If they don’t, one or several of their competitors certainly will.

What do you think? Is this the year when on-demand viewing is kingmaker for fall season broadcast
premieres on TV?